Six Degee Executive Newsletter

6 degrees




john gerrieIn this issue John Gerrie, Managing Partner at

KN3W Ideas, weighs in on the Coles and

Woolworths duopoly discussion with a

new perspective, pointing the finger at the

FMCG sector's loss of consumer focus.

The Coles and Woolworths duopoly has been a much talked about issue within the FMCG sector.  Increasingly, articles and current affairs comment on how the two dominant retailers misuse their market position to drive companies out of business, allocate shelf space to their housebrands disproportionately, or auction off shelf space to the highest bidder.  But John Gerrie, Managing Partner at Knew Ideas, believes the retailers aren’t the cause of the problems; instead the issue lies with the FMCG sector’s shift away from consumer marketing.

For many FMCG companies in Australia, Coles and Woolworths account for upwards of 60% of their sales, if not more. So it is not surprising their actions come under scrutiny by the sector.  It has even been suggested the ACCC should look at Coles and Woolworths’ behaviour in reference to ‘unconscionable conduct’, section 20 and 21 of the Australian Competition and Consumer Law.

In all this you would be forgiven for forgetting how the FMCG industry actually works.  We sell products to consumers through retailers. The old sporting analogy comes to mind – play the ball not the man. When a team starts reacting to a player, rather than the ball, they are very quickly drawn into playing the opposing team’s game, rather than playing their own game; of course you need to be aware of every move the opposing team makes, but the goal is to get the ball into the goal, and you should never take your eye off the ball. The ball in this analogy is of course the consumer.

As an industry we are fast losing focus of the simple fact the consumer decides what products they will use. If your brand has become interchangeable with a housebrand, don’t blame anyone but yourself. We have been so caught up in playing Coles and Woolworths’ game, we have taken our eye off the ball. The power balance has shifted from consumer-focus to trade-focus, and the customer marketing teams are running the business strategy instead of the consumer marketers.

We need to get our focus back on the consumer. You cannot ignore the importance of the trade marketing plan, but when the trade marketing plan runs your business, Coles and Woolworth will dominate in your decision making. Trade marketing should be part of your brand plan, but you need to be clear; consumer goods brands market to consumer and market through customer. When the through and to get confused, the trouble starts.

The whole organisation needs to be focused on the consumer, not just at the annual conference or fancy retreats, but every day. Every day you need to ask how your brand is going to satisfy the consumer better than anything else, particularly housebrands.

Coles regularly put their housebrands up against the best branded equivalents in a blind test and ask the question – would you buy it? I wonder how often the brands put themselves up against the housebrand and ask the same question. If we are not giving the consumer a significant and demonstrable reason to buy your brand over a housebrand you will lose the consumer, slowly, but surely.

So what can we, and should we, be doing?

1. Refocus the whole organisation on the consumer. Market to your consumer, through your customer. Get the whole organisation aligned on the’ to’ and the ‘through’.

2. Make sure your brand has a significant and demonstrable advantage over your competitor and housebrands. Not differences you wish for, but differences the consumers actual tell you are there, and differences they appreciate.

If you do not have that significant demonstrable difference, drop everything and build them into your brand fast, or you will be competing in the next auction for self space.

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